Bali Governor Warns Tourists to Stop Using Crypto for Payments
On Sunday, Bali’s local media reported that Governor Wayan Koster warned would-be tourists. At the Bali tourism development press conference, he warned foreigners not to use cryptocurrencies for payment in any capacity.
Otherwise, “strict actions” will follow for all parties involved:
“Strict actions range from deportation, administrative sanctions, criminal penalties, closure of business premises, and other tough sanctions,”
The Governor of Indonesia’s Bali province, Wayan Koster
This was the governor’s response to prior local news coverage. Kompas revealed that some businesses in Seminyak, a top beach resort, accept crypto payments. While local business owners could face closures, punishment for illegal foreign exchange activity could also land offenders in jail, for up to one year, in addition to paying a 200 million rupiahs ($13,354) fine.
Cryptocurrencies Ingrained in Bali’s Tourist Offering
Amid the viral scare, global tourism took a big hit. Indonesia’s Bali province still hasn’t recovered from pre-2020 levels, having dropped by 66%. Compared to 2019’s 6.2 million foreign inflow into Bali’s international airport, only 2.1 million were recorded by the Ngurah Rai Immigration Office in 2022.
Given the latest stern warnings by Bali’s governor, this figure is likely to remain low. It turns out that foreigners like to pay in cryptocurrencies/stablecoins so much that even some restaurant offerings cater to crypto tourists.
Kompas reported “Ethereum Flaming Sandwich, Solana Fish and Chips, and the BNB Latte” as some menu options. In Bali’s prominent hotspots, cryptos have supplanted the Indonesian rupiah from motorcycle rentals and restaurant menus to meditation sessions.
Moreover, after the Western block sanctioned Russia, more tourists will likely use nation-agnostic cryptos as fiat replacements. Of course, Indonesia’s currency is weakened if tourists pay for services and goods in currencies than the local ones. This defeats the purpose of having tourism in the first place, assuming that local businesses retain a portion of their revenue in cryptos.
But on the opposite end of the spectrum, El Salvador’s embrace of digital assets is geared towards increasing tourism. According to its Ministry of Tourism, El Salvador accomplished this early on, having the best tourism recovery rate at 81% by March 2022.
Indonesia’s Hybrid Approach to Cryptocurrencies
Unlike El Salvador, which fully embraced Bitcoin as a legal tender, Indonesia took a hybrid approach. Cryptocurrencies are not banned per se, but they are frowned upon. In October 2018, Indonesia’s SEC equivalent, the OJK (Otoritas Jasa Keuangan – Financial Services Authority), declared that financial institutions divest from offering crypto-related services.
This included de-banking crypto companies unless they have OJK-granted operating licenses. Indonesia’s central bank, Bank Indonesia, also took a hardline approach in September 2018, prohibiting financial institutions from using cryptocurrencies in all forms of payment.
Although this ban was lifted in February 2019, it applies to foreign entities, other banks, or tourists. Ultimately, crypto trading is legal as commodities but delegated to a few platforms, such as Indodax, Tokocrypto, or Pintu. Indonesian Commodity Futures Trading Regulatory Agency (BAPPEBTI) is in charge of its regulation.
In September 2022, Indonesia further tightened regulations by requiring the majority of board members of crypto exchanges to be citizens.
Bank Indonesia Prioritizes Rupiah Stability Over Crypto Innovation
Indonesia is the largest economy in South Asia, with nominal gross domestic product (GDP) at $1.3 trillion in 2022. However, since 2020, due to supply chain disruptions, rising commodity prices have exerted a negative toll on the Indonesian rupiah (IDR).
From March to September 2022, Bank Indonesia’s foreign exchange reserves dropped by $139.1 billion to $130.8 billion to stabilize the rupiah. Overall, since January 2020, the story of the Indonesian rupiah (IDR) against Bitcoin (BTC) is similar to other fiat currencies.
As of March 2023, Bank Indonesia reset its reserve assets at $140.3 billion. However, to safeguard against crypto-borne vulnerabilities, Indonesia is keeping cryptocurrencies at arm’s length. After all, Indonesia’s domestic tourism contributed 4.1% to the total GDP in the heydays of 2017.
In turn, smaller countries are less likely to pursue Indonesia-style crackdowns. Case in point, El Salvador’s tourism contribution to GDP was at 11.4% GDP in 2019.
This article originally appeared on The Tokenist
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